Mediation for IP Disputes
Prof. Yun Zhao
Department of Law, HKU
IP DISPUTES: Copyright infringements,
Patents, Trademarks,
Domain name disputes,
neighboring rights, etc.
IP disputes can be complex, sophisticated, and expert-heavy. A compounding
problem is that such disputes can be painfully slow – and delay can be
kryptonite to innovation and market leadership.
The life cycle of technical innovations is becoming shorter and shorter.
WAYS OF RESOLVING IP
DISPUTES
• Litigation
• Mediation (court mediation, administrative
mediation, people’s mediation, etc.)
• Arbitration
PROCEDURES INVOLVED IN
IP TRIAL
• Jurisdiction issue: how to select the jurisdiction
• Evidence: Perpetuation of evidence; obtain evidence through
investigation; verification; expert witness
• Evidence exchange system
• Temporary injunction
• „Engage professional lawyer
Hong Kong is a leading center for dispute resolution in the Asia-Pacific region and
has a tradition protecting IP.
One of the main reasons why some parties in the IP area still believe that mediation is
disadvantageous to their business is because they do not believe in a win-win-result.
Why we should promote the use of mediation to solve IP disputes?
There are many reasons.
BENEFITS AND ADVANTAGES
Why Mediation for IP Disputes?
Party autonomy
Neutrality
Time and cost
Creative solutions
Mediator’s expertise
Preservation of business relations
Confidentiality
Research shows that mediation can greatly increase the chances of achieving a settlement,
and of such settlements being lasting and effective.
In particular, mediation can be the best way to repair relationships. A lot of hard-nosed lawyers
scoff at the importance of relationships in commercial disputes. They are wrong to do so. In a
speech on mediation in 2015, Lord Neuberger, then President of the UK Supreme Court, cited a
2007 UK survey, “which reported that 47% of respondents involved in commercial litigation
admitted that a personal dislike of the other side had been responsible for driving them into
costly and lengthy litigation”. (From an address by Lord Neuberger to the Civil Mediation
Conference, 12 May 2015);
It provides the opportunity for catharsis. For many parties, mediation will be the only chance
they get to have their say, short of trial; and Mediation gives parties to IP disputes a particularly
good opportunity to look at matters in a practical, problem-solving way.
Mediation gives parties the chance to settle IP disputes. Settling IP
disputes enables parties to avoid the costs, delays, marginal returns, and
uncertainties of litigation. Settlement can also unlock a far broader range
of resolution options.
Mediation is an attractive option for parties that place a premium on the
preservation or enhancement of their relationship, seek to maintain control
over the dispute settlement process, value confidentiality, or want to reach
a speedy settlement without damage to their reputations.
Parties to contracts or relationships involving the exploitation of intellectual property
often share these goals when a dispute arises. Common examples of such contracts
include patent, know-how, and trademark licenses, franchises, computer contracts,
multimedia contracts, distribution contracts, joint ventures, research and
development contracts, technology-sensitive employment contracts, mergers and
acquisitions where intellectual property assets assume importance, sports marketing
agreements, and publishing, music and film contracts.
Example: A win-win solution case using ADR instead of litigation——the
IBM-Fujitsu case, resolved by arbitration, and in which ultimately "both
companies claimed they had been exonerated“.
The possibility of a mutually beneficial outcome
Whereas traditional forms of ADR tend to provide a winner-takes-all approach, mediation can foster understanding between parties, enabling them to reach common ground which allows new opportunities to flourish.
The following is a non-exhaustive list of what a settlement agreement can
achieve in an IP dispute that a determinative process cannot order:
Cross-licenses;
Agreements as to territories for sale;
Trade-offs between competing IP rights;
Negotiated royalty rates;
Agreements not to sue, and agreements not to oppose;
Agreements to changes in the IP rights to be claimed: eg, classes for a trade mark, narrowing of claims for a patent;
Agreed redesigns, rewordings, reworkings; and
Apologies.
The territorial nature of patents and the non-harmonized nature of trade
secret protection also do not facilitate the efficient resolution of
International IP disputes in court. It would be better to solve this kind of
problem through ADR, in particular mediation and arbitration.
More reasons to consider ADR for IP disputes (Philip J. McConnaughay. ADR
for Intellectual Property Disputes, 2002,
http://euro.ecom.cmu.edu/program/law/08-732/Courts/ADRPMcCon.pdf)
Certainty as to Forum.
The relative speed of ADR
The Availability of expertise
Confidentiality
Neutrality
Avoiding Local Corruption or an under-developed legal system/avoiding the identification of applicable jurisdiction and law
Flexibility of remedy
Enforceability of awards
Experienced mediator to find a satisfying solution can also maintain a good relationship.
ALTHOUGH THERE ARE SOME
CONCERNS…
Reasons to avoid ADR for IP Disputes, such as
Concern about the need for emergency injunctive relief
The strategic need for precedent or publicity
PRACTICE There is an increasing trend that mediation being used for solving IP disputes in
the world.
For instance, mediation is now mandatory for monetary-related IP disputes in
Turkey since 2019.
“The implementation of mediation in the Turkish justice system has progressed rapidly. Since mediation gives the parties a chance to reach an amicable solution by spending a reasonable amount of effort, time and money, it became an attractive solution for civil disputes. It became mandatory first for labor-related disputes and then for actions relating to commercial receivables, which cover IP-related matters in part. It is expected that, in the future, mediation will become mandatory for other types of IP disputes. Although it is thought that mandatory mediation will decrease the workload of the IP courts, the impact of this change cannot clearly be foreseen, since mediation is a relatively new concept in Turkey, where the litigious culture is still dominant. The impact of this change on Turkish IP law remains to be seen.”
Another example:
Greece
Mandatory mediation in trademark civil disputes. (By virtue of law 4512/2018,
which was published on 17 January 2018, all disputes concerning trademarks,
patents and industrial designs initiated before civil courts in Greece are subject to
mandatory mediation. Hearing of the cases shall be inadmissible if the mediation
process stipulated in the law has not been followed. The provisions shall start to
apply as of 17 October
2018.http://trademarkblog.kluweriplaw.com/2018/05/16/greece-mandatory-
mediation-trademark-civil-disputes-2/ )
Philippines: parties in a dispute over IP cases will be required to undergo
mediation, which is a more cost-efficient approach according to the
Intellectual Property Office of the Philippines since Oct 2018. According
to data, a total of 2,063 IP cases were referred to mediation, but only 55.7
percent or some 1,150 cases underwent mediation between 2011 and
August 2018. (https://business.inquirer.net/258248/ipophl-imposes-
mandatory-mediation-ip-disputes)
The Arbitration and Mediation Center of the World Intellectual Property
Organization (the WIPO Center)
provides a range of Alternative Dispute Resolution (ADR) services designed
to resolve international disputes for IP and technology. The WIPO Center
delivers these services through high-quality videoconferencing facilities to
make this service available digitally and help settle matters across
international borders.
CASE STUDY
Litigation cost too high
A research undertaken by the American Intellectual Property Law
Association (AIPLA), reported in 2003.
For patent suits, with less than $1 million at risk, the median estimated
cost of discovery is $290,000 and the media estimated total litigation
cost is $500,000; for suits with $1-25 million at risk, the median
estimated cost of discovery is $1 million and the median estimated total
litigation cost is $2 million; for suits with more than $25 million at risk,
the median estimated cost of discovery is $2.5 million and the median
estimated total litigation cost is $3,995 million. [All figures in US
dollars]
Time cost too long
The American Arbitration Association (AAA) recounts analysis undertaken by the IP litigation firm of Harness, Dickey, and Pierce, setting out the following estimated times:
Case evaluation phase: 1-2 months
Pre-trial proceedings (pleadings, discovery, motions): 12-18 months
Trial: 2-3 weeks
Appeal: 8-12 months
Second Trial (occurring approximately 53 percent of the time): 13-21 months
Public court litigation may end up taking longer than the life cycle of the product involved, given that some instances of technology can have a very short "shelf life".
By contrast, the AAA emphasizes that the time frame for a typical arbitration is about one third the amount of time for a litigation case, the culmination is reached in substantially less time, and as a result, the overall costs are decidedly lower.
CHINA’S SITUATION
2016 Opinions of the Supreme People's Court on People's Courts Further Deepening the Reform of Diversified
Dispute Resolution Mechanism
(9) Strengthening the connection with commercial mediation organizations and industrial mediation organizations. Chambers of commerce, trade associations, mediation associations, non-enterprise private entities, commercial arbitration institutions, etc. shall be vigorously propelled to establish commercial mediation organizations and industrial mediation organizations, and provide commercial mediation services or industrial mediation services in the fields of investment, finance, securities, futures, insurance, real estate, project contract, technology transfer, environmental protection, e-commerce, intellectual property, international trade, etc. Mediation rules and connection procedures shall be improved, and commercial mediation organizations and industrial mediation organizations shall be allowed to make use of their specialized and professional advantages.
State Council’s 2018 Opinion Concerning the Establishment of the Belt And Road International Commercial Dispute
Resolution Mechanism and Institutions
Uphold the principle of diversified dispute resolution. Fully considering the diversity of parties in the Belt and Road Initiative, the complexity of the types of disputes, and the differences in countries' legislations, judiciaries, and legal culture. Actively developing and improving protective mechanisms, which integrate litigation, arbitration, and mediation proceedings to meet parties' need from both China and abroad. Establishing the Belt and Road international commercial dispute resolution mechanism and institutions to create a stable, fair, transparent, and predictable business environment under the rule of law.
2018 Notice of the General Office of the Supreme People's Court on Determining the First International Commercial
Arbitration and Mediation Institutions to Be Included in the " One-stop" Diversified Settlement Mechanism for
International Commercial Disputes
China International Economic and Trade Arbitration Commission, Shanghai International Economic and Trade Arbitration Commission, Shenzhen International Arbitration Court, Beijing Arbitration Commission, China Maritime Arbitration Commission, China Council for the Promotion of International Trade Mediation Center, Shanghai Economic and Trade Mediation Center
First IP disputes focused People’s Mediation Committee—— Zhihu IP Dispute
People’s Mediation Committee established on July 13 2018
As of June 2018, there were more than 180 million users, more than 100 million answered, and throughout 2017, the platform received 55722 complaints of user infringement, of which 22493 were processed and the processing rate was 40.37%. It shows that the reality of intellectual property infringement is serious, the demand of rights protection is high but the protection of rights is difficult.
This is due to the small cost of intellectual property rights infringement on the Internet, but also because of the different protection of intellectual property rights between the various platforms of the Internet, the standards vary, resulting in the individual user rights to protect the steps complicated and inefficient. In addition, the Platform for complex and difficult infringement complaints, but also lack of professional ability to accurately judge, can not provide users with higher assistance. The People's mediation Committee was established to focus the resources and professional strength of all parties and shorten the time cost and effort of user rights protection.
In Beijing, 10 People's Mediation Committees on intellectual property disputes
has been set up by Beijing Intellectual Property Office. As of October 2018, the
People's Mediation Committee of Intellectual Property Disputes had handled
3,020 cases, closed 1705, completed 749 successful mediation, had a success
rate of 43.9%, and the mediation took an average of 15 days.
In Shanghai, the people's mediation committees for intellectual property
disputes in all districts of Shanghai accepted 2,157 cases of intellectual property
disputes in 2018, of which 1,497 cases were successfully mediated, accounting
for 69.4%. 382 cases were transferred, accounting for 17.7%. 46 mediation
cases were suspended, accounting for 2.1%. The number of people's mediators
for intellectual property disputes reached 142.
Conventional dispute resolution methods, such as judicial or arbitral
proceedings, concentrate on a ‘winner takes it all’ system or, at most, on
distributing value. In this latter context, it is simply about sharing out the
disputed pie. On the other hand, the philosophy that drives mediation is
the creation of multiple opportunities through enhanced understanding:
making the pie bigger. The goal of resolving a conflict should not be
victory or defeat but rather reaching common ground by letting go of the
need to be right; a change of mindset which would permit new
opportunities to flourish.
Thank you!